Solar panel prices have fallen more than 40 percent this year to $1.30 per watt, well below the high of $3.50 per watt they hit in 2008. But that shouldn’t scare clean technology investors interested in U.S.-based solar providers, where the solar panel market is predicted to double this year, according to the Solar Energy Industries Association (SEIA).

Emerging solar markets like those in New Jersey, and third-party residential solar installers such as SolarCity and SunRun, have put the U.S. on track to double its solar capacity growth this year when compared to 2010. New Jersey overtook California as the largest commercial solar market last year. More than half of all residential solar panel installations are now done by those third-party leasers and installers, as well.

The solar industry experienced a black eye when solar panel provider Solyndra, the now-controversial recipient of a $535 million loan guarantee from the U.S. Department of Energy, filed for bankruptcy earlier this month. That company was one of the first to receive a federal stimulus grant. But after raising $1 billion the company was forced to slash costs, close a factory and cancel an initial public offering as photovoltaic panel prices collapsed amid the economic recession that began in 2008.

Solyndra specialized in cylindrical solar panels that are not made out of polysilicon, a key component in crystalline solar panels. Solyndra was safe in the solar market when polysilicon prices were at their peak, but they fell rapidly as the U.S. entered a recession. That, along with a collapsing solar panel market in Spain, left Solyndra unable to compete with other manufacturers like SunPower, SEIA chief executive Rhone Resch told VentureBeat.

“What we saw occurring over the last several years was a decline in module prices much more rapid than anybody anticipated,” he said. “Solyndra couldn’t compete, Solyndra’s investors and officials assumed the price of polysilicon would continue to rise or maintain the high levels we experienced in 2008.”

Many governments are offering incentives for solar panel manufacturers, but the market is shifting in favor of higher-efficiency photovoltaic manufacturers because the incentives favor rooftop solar installations with smaller surface areas, senior director of global product marketing Jim Cushing of Applied Materials, a company that sells solar panel manufacturing equipment, told us. But even that market isn’t insulated from a glut of solar panels on the market.

Those incentives could expire by the end of the year, driving solar installation expansion down in 2012, GTM Research managing director Shayle Kann said in an interview. While the U.S. solar market is expected to double this year, it might only grow by around 50 percent next year, thanks to a lack of federal funding he said.

Despite pricing woes, solar panel manufacturing in the United States has some advantages over international manufacturers, Kann said. The U.S. solar panel market expanded by 314 megawatts worth of installations, up 69 percent from the same period last year. The U.S. solar market typically sees most of its growth in the fourth quarter of the year as well, Kann said. There are 7 gigawatts worth of installations already planned for construction in the United States.

“What’s happening, Solyndra is the exception to the rule rather than what’s happening across the board,” Kann said. “The US market remains a rare bright spot, I would say and I don’t think this is an exaggeration, every global solar player is currently developing or has developed a strategy to invest in the U.S. market.”